OLR Bill Analysis
AN ACT ENABLING THE REFINANCING OF STUDENT LOANS.
This bill allows the Connecticut Higher Education Supplemental Loan Authority (CHESLA) to issue loans to certain borrowers in order to refinance public or private student loans, including CHESLA loans (i.e., “eligible loans”). It also appears to allow Connecticut higher education institutions to similarly issue refinancing loans. The bill requires that refinancing loans not exceed the outstanding aggregate principal amount of the original loan. It allows CHESLA to establish guidelines, criteria, and procedures for issuing refinancing loans.
By law, CHESLA may issue tax-exempt bonds backed by the authority's revenues. The bill additionally allows CHESLA to issue taxable revenue bonds, including bonds that are eligible for federal tax credits, exemptions, and payments. Before issuing such bonds, CHESLA must find that their issuance is necessary, in the public interest, and in furtherance of the authority's powers and purposes. (Under the federal Internal Revenue Code, tax-exempt bonds cannot be used to refinance student loans.)
Under the bill, CHESLA must incorporate information about refinancing loans (e.g., number of applications received, number of students assisted) into its annual report. By law, CHESLA must provide the report to its board of directors, the governor, auditors of public accounts, and the Education and Finance, Revenue and Bonding committees (CGS § 10a-240).
The bill also (1) allows CHESLA to issue education grants, (2) revises the membership criteria of CHESLA's board of directors, and (3) makes technical and conforming changes.
EFFECTIVE DATE: July 1, 2015
The bill allows CHESLA to issue loans to certain borrowers in order to refinance student loans (i.e., “eligible loans”). Under the bill, an “eligible loan” is a loan that is in repayment that was made (1) by CHESLA or (2) to a “borrower” by any other private or governmental lender to finance attendance at a higher education institution. A “borrower” is:
1. someone who has an outstanding CHESLA loan,
2. an individual who (a) attends a Connecticut higher education institution or who currently resides in the state and (b) has received or agreed to pay an “education loan” or
3. a parent who has received or agreed to pay an “education loan” on behalf of a student who attends a Connecticut higher education institution or currently resides in the state.
An “education loan” is a loan to (1) a student in or from Connecticut, or a parent of such a student, to finance attendance at a higher education institution, or (2) a “borrower” to refinance one or more “eligible loans.”
By law, higher education institutions in Connecticut may issue loans using proceeds from CHESLA (CGS § 10a-241). By authorizing CHESLA to issue refinancing loans, the bill appears to similarly authorize Connecticut higher education institutions to use proceeds from CHESLA to issue refinancing loans.
The bill allows CHESLA to issue education grants, which the bill defines as grants, scholarships, fellowships, or other nonrepayable assistance awarded (1) by CHESLA to a student currently residing in Connecticut to finance his or her attendance at a Connecticut higher education institution or (2) by or on behalf of such an institution to a Connecticut resident from the proceeds of funds provided by CHESLA. The bill allows CHESLA to establish guidelines, criteria, and procedures for issuing education grants.
BOARD OF DIRECTORS
By law, CHESLA is governed by a nine-member board of directors. Under current law, two of the members must be (1) active or retired trustees, directors, officers, or employees of Connecticut higher education institutions and (2) members of the Connecticut Health and Educational Facilities' (CHEFA) board of directors. The bill (1) eliminates the requirement that these appointees be members of CHEFA's board of directors and (2) requires that they be (a) Connecticut residents and (b) appointed by CHEFA's board of directors.
Under current law, the appointees serve on the CHESLA board (1) for as long as they are on the CHEFA board or (2) until a successor is appointed. Under the bill, the appointees serve six-year terms.
HB 6907, reported favorably by the Higher Education Committee, also allows CHESLA to refinance loans, but caps the interest rate CHESLA may charge borrowers.
Higher Education and Employment Advancement Committee